Business: Gasoline, food costs help drive wholesale prices higher

By JEANNINE AVERSA, Associated Press

WASHINGTON (May 11, 2001 8:40 a.m. EDT http://www.nandotimes.com) - Wholesale prices climbed 0.3 percent in April as gasoline prices took the biggest jump in 10 months and food costs climbed sharply, the government reported Friday.

The modest advance in the Labor Department's Producer Price Index, which measures inflation pressures before they reach store shelves, followed a decline in wholesale prices in March.

The April PPI was better than the 0.4 percent rise many analysts were expecting. The increase was the largest since wholesale prices shot up by 1.1 percent in January.

Excluding volatile energy and food prices, wholesale inflation rose 0.2 percent in April, up from a 0.1 percent gain in March, and slightly faster than analysts were expecting.

The Federal Reserve slashed interest rates four times this year, totaling 2 percentage points to prevent the struggling economy from tipping into recession. Economists are predicting another rate reduction when policy-makers meet Tuesday.

While concerned about inflation creep, economists estimate that higher prices for energy and other items are more likely to squeeze companies' profits than be passed along to consumers in the form of higher prices - a difficult undertaking when the economy is weak.

In April, overall energy prices rose a tiny 0.1 percent after falling by 2.6 percent in March.

Gasoline prices jumped 7 percent in April, the largest increase since June 2000, when they rocketed upward by 18.1 percent.

Over the last two weeks, the average retail price for gasoline in the United States increased 8.58 cents to $1.76 a gallon, according to the Lundberg Survey of 8,000 service stations nationwide. Motorists in the Midwest and West saw the biggest jumps at the pump.

Prices for heating oil and residential electric power rose 2.1 percent and 0.2 percent, respectively, in April. But residential natural gas prices, which have soared, actually fell by a record 4.3 percent, surpassing the previous biggest monthly drop of 4 percent in March. Still, even with the decrease, natural gas prices remain high.

Food prices, meanwhile, rose 0.6 percent in April, on top of a whopping 1.1 percent increase in March. Price increases were widespread, with eggs, dairy products, fish, chicken, pork and fruit all showing gains. Those increase swamped falling prices for coffee and vegetables.

Elsewhere in the report, prescription drugs rose 0.5 percent reflecting increased demand by aging baby boomers and the introduction of newer, more expensive drugs, economists say.

Car prices edged up 0.2 percent. Computer prices jumped 1.5 percent, a record increase, exceeding the previous monthly all-time high gain of 0.7 percent posted in September 1993.

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-- Martin Thompson (mthom1927@aol.com), May 14, 2001